Evergrande Sell Off And Bitcoin

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After covering the Evergrande Real Estate Group last week in Daily Dive #060, our biggest concerns were with increased contagion spread to the Chinese economy and global markets. Since then, we’ve seen a tidal wave of Chinese market sell-offs in the real estate sector, a rise in China bond yields and a larger S&P 500 correction unfolding at the same time. China junk bond yields continue to climb past their March 2020 highs at 14% plus, while the Hang Seng Index fell an additional 8.35% since September 7.

Evergrande Spillover, Source: Bloomberg

Hong Kong Hang Seng Index, Source: TradingView

So far, the largest contagion spread impacts show up in China’s over-leveraged real estate sector with equity and bond sell-offs happening amongst other top property developers like Country Garden Holdings and Sunac China Holdings. The next level of contagion spread would show up in the Chinese banking sector amidst a liquidity crunch. On Friday, The People’s Bank of China injected 90 billion yuan ($14 billion) of funds, the most since February, to provide short-term liquidity into the banking system.

Developing Contagion, Source: Bloomberg

Liquidity Jitters, Source: Bloomberg

Shares of Sinic Holdings Group Company, a Shanghai-based real estate developer, plunged nearly 90% on massive volumes (approximately 14 times above average trading volume) before trading was halted. In an article published by Bloomberg, Philip Tse, director and head of Hong Kong and China property research at Bocom International Holdings Co Ltd. said the following,

“‘It’s the same story as everywhere else — investors are concerned about the liquidity. I think there are most likely some margin calls on some of the major shareholders,’ by looking at Sinic’s stock price pattern this afternoon.”